AllianceBernstein Holding L.P. Units

Thank you for standing by, and welcome to the Alliance Bernstein First Quarter 2021 Earnings Review. At this time, all participants are in listen-only mode. After the remarks, there will be a question and answer session, and I will give you instructions on how to ask a question at that time. As a reminder, this conference is being recorded and will be available for replay for one week. I would now like to turn the conference over to the host for this call, Head of Investor Relations for AB, Mr. Mark Griffin, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our first quarter 2021 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the investor relations section of our website, www.alliancebernstein.com. With us today to discuss the company's results for the quarter are Seth Bernstein, our president and CEO, and Ali Dabaj, CFO. Additionally, Matt Bass, head of private alternatives, will join us to discuss our private alternatives business, and Kate Burke, COO, will join us for questions after our prepared remarks. Some of the information we'll present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure, so I'd like to point out the Safe Harbor language on slide two of our presentation. You can also find our Safe Harbor language in the MD&A of our first quarter 10-Q, which we filed earlier this morning. Under Regulation FD, management may only address questions of material nature from the investment community in a public forum. So, please ask questions during this call. Now, I'll turn it over to Seth.

Good morning and thank you for joining us today. In the first quarter, we drove balanced growth across all three channels. Geographic diversification and differentiated client-focused offerings, specifically across ESG, active equities, alternatives, and municipals led the way. Near-term investment performance rebounded strongly in fixed income, while sound long-term performance across other asset classes and our institutional pipeline grew to a record annualized fee base led by alternatives. For the quarter, we posted active organic growth of 4% while expanding our operating margin to 31.7%. We delivered 27% growth in both earnings and distributions to unit holders. Let's get into the specifics, starting with a firm-wide overview on slide 4. Gross sales were $33.3 billion, our second highest quarter since pre-financial crisis 14 years ago. Sales were up $1.7 billion, or 5% from a year ago and up 6% from the prior quarter. Firm-wide active net inflows were $6.5 billion, a 4% annualized organic growth rate. Quarter end assets under management of $697 billion were the highest since pre-financial crisis, increasing 29% year-over-year and 2% from the prior quarter. An average AUM of $689 billion increased 14% year-over-year and 6% sequentially. Slide five shows our quarterly flow trend by channel. First quarter net inflows were positive in each channel. Retail generated its second strongest gross sales ever with net inflows of $2.7 billion as strength in active equities and munis more than offset outflows in taxable fixed income, showing the balance we've built in our retail business. Institutional sales of $4.9 billion led to net inflows of $800 million driven by growth in taxable fixed income. In private wealth, Gross sales increased 54% year-over-year and were up 46% sequentially with continued advisor productivity gains. Net inflows of $1.7 billion reflected improved investment performance and heightened client risk appetite. Now, let's turn to investment performance beginning on slide six. In the first quarter, yields rose meaningfully in nearly all developed fixed income markets, reflecting reflationary concerns amidst expectations for a strong global economic rebound. With exception of high yield, bond returns were negative, and credit sectors outperformed governments. Despite the first quarter's yield-driven price declines, global credit sectors have rebounded strongly over the past 12 months following the COVID-19-driven sell-off in March of last year. Our strategies with global and multi-sector credit positioning, including global high yield and American income, have benefited during this risk-on period. Furthermore, each of the five income strategies on our retail income platform, U.S. retail income platform, ranked in the top quartile of their respective Morningstar categories over the one-year period. For the one-year period ended in March, 91% of our fixed income assets outperformed, a strong rebound versus prior periods. 55% of our assets have outperformed over the three-year period and 65% over the five-year period. Our municipal lineup continued to outperform with nine out of ten funds in the top quartile across each time period. We saw strong inflows this quarter as income was in demand. For example, our municipal bond inflation fund, which we believe is the only fund in the industry to combine muni bonds and 100% edge to inflation through tax-efficient CPI swaps, saw solid inflows, benefiting from reflationary concerns, which were otherwise a negative for yield products. In equities, our long-term performance remains solid, as 57% of assets outperformed over the three-year period and 67% outperformed over the five-year period. Our one-year equity performance was 38% of assets outperforming, reflecting our lower weightings relative to heavy benchmark concentration of mega-cap stocks with abnormally high exposure to risk factors like beta and momentum. It's worth noting that year-to-date, a portfolio of these five stocks held in proportion to their market weights would have underperformed the S&P 500 by nearly 800 basis points. We positioned our portfolios to participate in greater market breadth as the economy started to reopen. In the first quarter, 62% of our equity composites outperformed their benchmarks, led by our value and core strategies. Growth strategies held their ground. Our sustainable U.S. thematic equities fund won CityWire's U.S. Offshore Award, beating over 2,000 funds available to U.S. offshore investors for providing the most value-add over a three-year period. Additionally, our concentrated growth and large-cap growth funds were both upgraded to bronze medalist-ranked funds by Morningstar, a designation received by only 5% of funds with assets over $100 million. Moving on to our client channels beginning with retail on slide seven. Gross sales are the second strongest on record, 5% below a record first quarter 2020 and up 30% sequentially. Then inflows were 2.7 billion driven by a 17% annualized organic growth and active equities, our 16th straight quarter of active equity inflows. U.S. retail SMA sales accelerated and we had a strong quarter in Japan. Municipals grew by 18% annualized, helping to offset higher taxable fixed income redemptions in our high-income suite. As shown on the upper left chart, a balanced and diverse product offering has led to consistent organic growth with retail channel generating positive net inflows nine of the last 11 quarters. Geographic balance continues with the U.S. 36% of sales, Japan, EMEA, and Latin America 34% of sales, and Asia X Japan, 30%. We now have 61 products of more than $1 billion each, balanced across asset classes. Our equity funds rank 12 of 454 managers with several of our largest fund postings strong flow rankings, as shown on the bottom right. Muni's ranked 14th out of 110 managers. Now I'll discuss institutional on slide eight. First quarter gross sales of $4.9 billion were up 26% year over year, driven by diverse fixed income sales, and were down 51% sequentially. Fixed income sales were robust, up 300%, driven by credit, U.S. investment-grade corporates, securitized debt, CLO, and emerging market debt. Active equity sales of $900 million saw strong growth in ESG, and our active equities unfunded pipeline reported the third strongest ASB since we began tracking this back in 2011. Speaking of ESG, yesterday we announced a groundbreaking commitment as founding member of the Corporate Affiliate Program at the newly launched Columbia Climate School. This is the second phase of our relationship that began in 2019, facilitating ongoing interaction between AB's investors and Columbia University's scientists and experts on climate issues as they arise in the investment process across portfolios, sectors, asset classes, and regions. Our institutional pipeline grew to 15.2 billion at quarter end, up 25% sequentially, driven by growth and alternatives. The AFB of well over 50 million is a record and represents a 20% compound annual growth since we began tracking in 2011. As shown in the bottom right, notable pipeline additions include $1.5 billion of lower-fee CRS, $1.1 billion in our fourth U.S. commercial real estate debt fund, supported by Equitable, $1 billion in EuroCred, also supported by Equitable, and $750 million in U.S. investment-grade corporates. Moving to private wealth management on slide nine. Gross sales of $5.4 billion increased by 54% year-over-year and 46% sequentially, with strong continued improvements in advisor productivity. Combined with lower redemptions, we generated net inflows of $1.7 billion, reflecting improved investment performance and heightened client risk appetite. Increasingly, clients actively deployed cash into long-term allocations, and we also saw a notable increase in pre-IPL planning versus the prior year, which bodes well for future funding. We raised $106 million in private credit and $75 million in our first close of our private equity funder funds. As shown on the bottom right, we continue to experience strong growth in UniImpact, ESG, and our proprietary separately managed equity tax loss harvesting products. We're planning for a significant acceleration in new product launches in 2021 across a diverse array of funds, including alternative ESG and SMA platforms. I'll finish our business overview with the sell side on slide 10. Bernstein Research revenues increased 1% sequentially, and we're down 8% versus last year's extraordinarily volatile first quarter. Growth in Asia continues to be strong, with trading commissions up 50%, compounding similar prior year gains. India continues to show outsized growth stemming from focused investments. Strong increases in U.S. market trading volume shown on the bottom left graph were driven by higher mix of retail investors. As you know, our business remains institutionally focused. That said, we saw generally healthy trading volumes across our desks, despite volatility declining from prior periods. We experienced good momentum for our sell-side offerings with research checks up 15% in the quarter. Progress toward our strategy in the first quarter is shown on slide 11. 57% of our equity assets and 55% of our fixed income assets are outperforming over three years, and 67% of equities and 65% of fixed income are outperforming over five years. Near-term performance in fixed income improved to 91% of assets outperforming. Our geographic and product balance drove consistent organic growth across all channels, with retail positive nine of the last 11 quarters and institutional positive seven out of the last eight quarters. Our institutional pipeline now has a record fee base well over $50 million, with alternatives accounting for over half of the total. We closed on $900 million in our fourth U.S. commercial real estate debt fund and closed on $400 million in our second CLO. Private wealth had strong sales and net inflows, and we're executing on the diverse product pipeline for 2021. Differentiated product continues to amplify growth, including our ESG's portfolios with purpose, now $21 billion in AUM, up 27% sequentially. We are committed to managing our business to deliver strong incremental operating margins. Our first quarter adjusted operating margin of 31.7% was up 410 basis points year over year, with earnings and unit holder distributions up 27% versus the prior year period. From time to time going forward, I'll be inviting key members of our operating committee to participate in our earnings calls to highlight established and emerging areas of our business. Today, I'm delighted to introduce Matt Bass, who runs our growing private alternatives platform. Matt will share some comments, followed by Ali Dabaj, who will wrap up with our financials. Matt?